1. The UAE Insurance Industry
2 August 2009

2.
TABLE OF CONTENTS
Executive Summary ........................................................................................................................................... 4
I.
Scope of the report........................................................................................................................................ 4
II. Investment rationale ...................................................................................................................................... 4
1. Middle East Insurance Industry..................................................................................................................... 6
1.1. Overview........................................................................................................................................................ 6
1.2. The GCC ....................................................................................................................................................... 7
1.2.1.
1.2.2.
1.2.3.
1.2.4.
Overview ..............................................................................................................................................................7
Conventional vs. Takaful......................................................................................................................................7
Non-life insurance dominates...............................................................................................................................7
‘National’ insurers.................................................................................................................................................8
2. Financial performance.................................................................................................................................... 9
2.1. Financial performance................................................................................................................................... 9
2.2. Takaful and life insurance attractive growth areas ..................................................................................... 13
2.3. Comparative Financial Performance........................................................................................................... 13
3. Valuations ...................................................................................................................................................... 15
4. Stock Liquidity .............................................................................................................................................. 15
5. Growth Illustration ........................................................................................................................................ 16
6. Corporate Governance ................................................................................................................................. 18
7. Key Growth Drivers ...................................................................................................................................... 19
7.1. Favorable demographics............................................................................................................................. 19
7.2. High and rising GDP per capita .................................................................................................................. 19
7.3. Economic diversification.............................................................................................................................. 19
7.4. Regulation driving growth............................................................................................................................ 20
8. Emerging Trends .......................................................................................................................................... 21
8.1. Islamic Insurance making inroads............................................................................................................... 21
8.2. Regulatory framework ................................................................................................................................. 21
8.3. Leveraging distribution channels ................................................................................................................ 23
8.4. Cross - border expansion............................................................................................................................ 23
8.5. Advent of foreign players leading to increased competition ....................................................................... 23
8.6. Focus on core activities............................................................................................................................... 24
8.7. Expected consolidation ............................................................................................................................... 24
9. Key Risks ....................................................................................................................................................... 25
9.1. Equity and property market volatility ........................................................................................................... 25
9.2. Weakening underwriting performance ........................................................................................................ 25
9.3. Project delays and cancellations................................................................................................................. 25
9.4. Increased use of captive insurance ............................................................................................................ 25
9.5. Shortage of skilled labor.............................................................................................................................. 26
Appendix: Company Profiles .......................................................................................................................... 27
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3.
DISCLAIMER
This material was produced by Alpen Capital (ME) Limited (‘Alpen’), a firm regulated by the Dubai Financial Services Authority. This
document is not to be used or considered as an offer to sell or a solicitation of an offer to buy any securities. Alpen may, from time to
time, to the extent permitted by law, participate or invest in other financing transactions with the issuers of the securities
(‘securities’), perform services for or solicit business from such issuer, and/or have a position or effect transactions in the securities
or options thereof. Alpen may, to the extent permitted by applicable UAE law or other applicable laws or regulations, effect
transactions in the securities before this material is published to recipients. Information and opinions contained herein have been
compiled or arrived by Alpen from sources believed to be reliable, but Alpen has not independently verified the contents of this
document. Accordingly, no representation or warranty, express or implied, is made as to and no reliance should be placed on the
fairness, accuracy, completeness or correctness of the information and opinions contained in this document. Alpen accepts no
liability for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. This document
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agree to be bound by the foregoing limitations.
P a g e | 3

4.
Executive Summary
I. Scope of the report
T
his report caters to investors who are looking to
the continuation of a long term trend that has seen the
invest in the UAE insurance sector (life and non-life).
average ratio of ceded to retained premiums fall from about
The primary focus of the report is on conventional
61.3% in 2007 to about 56.4% in the second quarter of 2009.
(non-Islamic) insurers and factors that drive premium income
This trend signals greater sophistication and underwriting
and earnings growth, including opportunities, challenges and
capacity of the UAE insurers, but also raises the question of
key trends facing the industry. The report also covers
the extent to which the insurers are equipped to handle the
valuations, governance and liquidity of the major industry
risks that are now retained, rather than passed on to
players.
reinsurance companies.
II. Investment rationale
• The UAE insurers are responding to lower growth by
Notwithstanding the global recession, the UAE insurance
ceding less business to reinsurance companies. In the
industry’s long-term outlook remains positive. Although
second quarter of 2009 the ratio of ceded to retained
weakness in new car and home sales and construction
premiums fell to an all time low of 56.4%.
project delays and cancellation will result in weaker growth
in 2009 than over the past decade, we believe the sector will
resume double digit growth rates in 2010 to 2012. The key
factors underpinning the strong growth potential are
(Chapter 7):
While average growth in gross premium income was about
15.1% in the first and 0.8% in the second quarters of 2009,
growth in net premium revenue (net of reinsurance and
provisions for unearned premiums) was in excess of 20.0%
in both the first and the second quarter. We view growth in
• Low insurance penetration. Regulation, greater affluence,
gross premium income as a leading and growth in net
growth in organized savings, greater availability of Takaful
premium revenue as a lagging indicator of growth.
insurance products and changing consumer habits are
• Gross premium income growth is slowing rapidly, while net
some of the key drivers for spending on insurance
products.
• Strong
economic
premium income continues to grow fast, signaling slower
revenue growth ahead in 2009.
growth.
Efforts
to
diversify local
economies and greater investment in development of local
economies (as opposed to investment abroad) than in the
past.
The UAE insurers continue to perform very well in terms of
underwriting performance (Chapter 2.1). The performance
has been uneven however with about half the peer group
reporting increasing and half decreasing underwriting profits
over the past three years. Longer term, the average
• Favorable demographics.
underwriting margin is on a declining path, although this
We expect the UAE life and medical insurance industry to
remains very high by international standards. The decline is
grow at a significantly faster pace than non-life insurance.
a reflection of rapid growth over the past few years and
Oman
Insurance
increasing competition. The earnings performance is also
Company are well placed to capitalize on this opportunity
affected by cross-subsidization of unprofitable lines, such as
with 23.7% and 17.0% respectively of 2008 revenue
3rd party motor insurance.
Insurance
Company
and
Emirates
accounted for by life premiums.
• Very strong underwriting performance in the first half of
• Life and medical is growing faster than general insurance.
2009, but the long term trend points to greater
competition.
The UAE insurers are responding to slower growth in 2009
by ceding less business to reinsurance companies. This is
P a g e | 4

5. All insurance companies surveyed, other than Arab Orient
however, with the introduction of a new regulatory body and
Insurance
aggressive
the promise of a capital adequacy regime akin to Solvency II
investment strategies, with an average of 65% of assets
Company,
have
adopted
very
(Chapter 8.2). This should encourage more discipline in
invested in equities and real estate, mostly locally (Chapter
areas of investment strategy, underwriting, reinsurance and
2.1). This has resulted in very volatile investment returns,
risk management. We believe the regulatory reform will also
with significant losses incurred in 2006 and 2008. In the
spur consolidation and cross boarder expansion, particularly
context of weak transparency and governance practices, we
into less penetrated markets in the MENA region, in the
feel this approach is unappealing to potential investors, but
relatively fragmented industry.
at the same time presents a great opportunity to unlock
Greater competition from foreign players entering the UAE
shareholder value.
market is encouraging local players to develop their
• Greater sophistication in investment strategy required.
distribution networks and strategies, enter into joint ventures
with their bank counterparts (bancassurance), and place
• Higher asset allocation towards cash and bonds and less
on equities and real estate. Better diversification of
more emphasis on product development and innovation
(Chapter 8.3).
investments and higher allocation to international assets.
We have identified the following key risks to investors in the
The UAE insurers are closely held and their stocks are
UAE insurance industry (Chapter 9):
inherently illiquid. The stocks are trading at relatively
moderate valuations, similar to an international peer group
(Chapter 3). The valuations are underpinned by strong
growth and good underwriting performance, but hampered
by aggressive investment strategies, lack of transparency
and weak stock liquidity. We feel there is potential to unlock
significant
value
shortcomings
in
by
terms
addressing
of
relatively
investment
simple
strategy
and
transparency.
• Very illiquid stocks.
• Trading at an average P/E ratio of 13.7 times.
• Potential to unlock shareholder value by adopting more
sophisticated investment strategy and providing greater
• Very high exposures to local equities and real estate and
hence high earnings volatility.
• Weakening underwriting performance on the back of rapid
growth, lack of claims history in some lines of insurance,
shortage of qualified staff (e.g. actuaries) and crosssubsidy of unprofitable lines.
• Increasing competition and pressure on premiums.
• Construction project delays and cancellations particularly
in Dubai.
• Increasing use of captive insurance.
• Weakness in governance and transparency.
transparency.
Conventional insurance continues to dominate the UAE
market, but more and more players are also establishing
Islamic compliant units (Chapter 8.1). We view exposure to
Islamic insurance as a positive, given a somewhat higher
growth rate than for conventional insurance, and favor
players present in both segments, such as Arab Orient
Insurance Company and Al Buhaira Insurance Company.
The UAE regulatory regime for the insurance industry is
minimal. Significant changes are expected going forward
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6.
1. Middle East Insurance Industry
Chart 3: Non-life insurance market growth (%)
10.7%
1.1. Overview
5.5%
The Middle East insurance industry is relatively small and
3.1%
3.6%
3.0%
underdeveloped, accounting for less than 0.7% of the global
insurance market of US$4.27 trillion in 2008 (See chart 1).
-0.4%
Middle East
and Central
Asia
Chart 1: Global insurance market, 2008
3.4%
3.0%
0.6%
Africa
-0.8%
-1.2%
Japan*
Western
Europe
-2.8%
North America
World
100% = US$4.27 trillion
Growth rate, 2008/2007, (%)
US
34.0%
Oceania
1.8%
Africa
1.3%
Middle East
and Central
South and
Asia
East Asia
0.7%
5.4%
Annual average growth rate 1998-2007 (%)
Source: Swiss Re, *Incl. newly industrialized Asian countries
Life insurance premiums in the Middle East & Central Asia
grew 6.0% in 1998 to 2007 and 9.3% in 2008, significantly
Europe
41.1%
higher than 4.1% and -3.5% globally (See chart 4).
Japan*
15.8%
Chart 4: Life insurance market growth (%)
9.3%
Source: Swiss Re, *Incl. newly industrialized Asian countries
6.0%
5.5%
6.4%
6.9%
5.2%
4.1%
3.6%
The average insurance penetration (gross premium written
-0.8%
as a percentage of GDP) is very low at 1.5% compared to a
-3.5%
-3.4%
global average of 7.1% (See chart 2), suggesting there is
-11.6%
significant room for growth.
Middle East
and Central
Asia
Africa
Japan*
North America
Western
Europe
World
Chart 2: Global insurance premiums and penetration
Growth rate, 2008/2007, (%)
4,500
12%
3,500
3,000
8%
2,500
2,000
1,500
4%
1,000
Insurance Penetration
(%)
Premiums in 2008
(US$ billion)
4,000
Annual average growth rate 1998-2007 (%)
Source: Swiss Re, *Incl. newly industrialized Asian countries
Thus, the total insurance premiums in the Middle East &
Central Asia grew 4.7% in 2008, compared to a decline of
2.0% globally (See chart 5). The prospect for the Middle
East insurance industry is positive with potential for annual
500
0
0%
Europe
US
Japan* South & Africa Oceania Middle World
East
East &
Asia
Central
Asia
Premiums in 2008 (US$ billion)
premiums to grow by over three times before the insurance
density reaches the global average.
Insurance Penetration (%)
Source: Swiss Re, *Incl newly industrialized Asian countries
Chart 5: Insurance premium growth, 2008, (%)
4.7%
Religious and cultural factors and lack of regulatory controls
3.8%
have historically suppressed the growth of the insurance
sector in the Middle East. However, in the last decade the
market has grown rapidly, faster than any other region of the
-6.2%
According to Swiss Re, non-life insurance premiums in the
Middle East & Central Asia grew 10.7% in 1998 to 2007 and
3.1% in 2008, far outpacing the growth rate of 3.4% and -
-2.0%
-2.4%
world.
Middle East
and Central
Asia
Japan*
US
Europe
World
Source: Swiss Re, *Incl. newly industrialized Asian countries
0.8% globally (See chart 3).
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7.
1.2. The GCC
Chart 7: Conventional versus Islamic insurance
Conventional
1.2.1. Overview
• Risk transfer from
policyholder to
insurance
company
Responsibility of
policyholders /
takaful
participants
• Policyholders pay • Participants make
contributions to the
a premium to the
scheme
insurer
• All underwriting surplus
• All underwriting
distributed among the
surplus transferred
policyholders, who are
to shareholder’s
also liable for any
account
deficit
Management
status
• Takaful operator acts
• The insurer
as administrator of the
manages a
scheme and pays the
policyholders’ fund,
takaful benefits from
and, if required,
the policyholders’ fund
shareholders’ fund
• In the event of a
shortfall in the
policyholders’ fund, the
takaful operator is
expected to provide an
interest-free loan to
cover the deficiency
Access to capital
• Access to share
capital and debt
with the possible
use of
subordinated debt
Investment of
funds
The UAE hosts the GCC’s largest and the most developed
• Interest based
bonds and fixedincome
investments are
made by the
insurer
• There are no
restrictions except
for those imposed
for prudential
reasons
insurance market. The UAE and Bahrain has the highest
insurance penetrations, more than double the rate of Saudi
Arabia and Kuwait (See chart 6). The growth rate is
effectively a function of the insurance penetration, with
Kuwait and Saudi Arabia growing faster than the UAE and
Bahrain.
In 2008, gross premium income for the UAE insurers grew
by 26.3%, while the insurance penetration stood at 2.0%,
highest amongst the GCC countries. Despite the rapid
growth, the relatively low insurance penetration rates
suggest there is still strong potential for growth.
Gross Premium growth, 2008 / 2007 (%)
Chart 6: Insurance penetration, 2008
premium income growth, 2008/2007 (%)
38.0%
&
Gross
Kuwait
(0.6%, 35.4%)
36.0%
34.0%
32.0%
Saudi Arabia
(0.6%, 34.1%)
30.0%
Oman
(1.1%, 31.7%,)
The UAE
(2.0%, 26.3%)
28.0%
26.0%
Bahrain
(2.0%, 24.9%)
24.0%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
Islamic
Basis of
Contract
1.6%
1.8%
2.0%
2.2%
Insurance Penetration, 2008 (%)
Source: Swiss Re, June 2009, Size of bubbles indicate gross
premium income (US$ million) in 2008
• Cooperative risk
sharing between the
policyholder and
insurance company
• Access to share capital
by takaful operator but
not to debt, barring an
interest-free loan to
cover a deficiency in
the policyholders’ fund
• Only interest (Riba)
free investments are
permitted
• Investments prohibited
in Haram industries like
those related to
alcohol, tobacco, pork
products etc
Source: Alpen Capital
Conventional insurance remain dominant, accounting for the
1.2.2. Conventional vs. Takaful
The GCC insurers can be broadly categorized as either
conventional or Islamic (Takaful), with some players present
in both categories. Takaful premiums represent around 20%
of the GCC insurance market, whereas the Saudi Arabian
market is dominated by Takaful (See also chapter 8.1).
majority of the GCC market, however the Takaful market is
also growing fast. The Saudi insurance regulator, SAMA,
has made it compulsory for new insurers to comply with
Sharia law. As a result, the number of Takaful insurers in the
region has risen rapidly. No such requirement is imposed in
the UAE and conventional insurance remain dominant.
While conventional insurance is viewed as a form of risk
1.2.3. Non-life insurance dominates
management tool primarily used to hedge against the risk of
The UAE insurance market is dominated by non-life
contingent (uncertain) financial losses in exchange for a pre-
business, driven by mandatory third-party motor insurance
specified premium, Takaful is based on the principles of Ta-
and health insurance for expatriates and the enormous
awun (mutual assistance) and Tabaru (voluntary). Moreover,
growth in the construction and real estate sectors over the
being subject to the laws of Sharia, Takaful prohibits
past decade. Non-life insurance accounted for 81.3% of the
investments in Haram industries (gambling, liquor etc) and
total gross premiums in 2008 (See chart 8). This is in
advocates usage of instruments that are free of Riba (usury)
contrast to a market share of around 59% for life insurance
(See chart 7).
P a g e | 7

8. and 41% for non-life insurance globally, underscoring the
Life insurance premiums in the GCC (excluding Qatar) grew
growth potential for life insurance in the region.
34.4% in 2008 compared to 28.8% for non-life insurance.
The most populated economy of the GCC, Saudi Arabia,
Chart 8: Life and Non-Life insurance in the GCC, 2008
100% =
in US$
million
5,016.0
18.7%
81.3%
3,070.0
914.0
578.0
18.8%
relatively low base. The UAE grew at a more moderate rate
451.0
23.1%
5.2%
recorded the highest growth rate of 81.6%, albeit from a
28.6%
of 30.0%. The UAE is far the largest market in absolute
terms with life insurance gross premium income of US$937.0
million in 2008 (See chart 11). According to the Emirates
94.8%
81.2%
76.9%
71.4%
Insurance Association, the UAE life insurance market is
expected to grow at least 16% to 20% annually up to 2012.
Saudi
Arabia
Kuwait
Oman
Bahrain
Chart 11: Life insurance in the GCC
Non-Life
Life
2007
937
1,000
2008
2008/2007 (%)
90%
900
The UAE does not only boast a higher insurance
penetration, but it is also the largest in absolute terms
among the GCC countries (See chart 9).
Chart 9: Non-Life insurance in the GCC, 2008
Life Insurance Premium
(US$ million)
Source: Swiss Re, June 2009
800
80%
82%
721
70%
700
60%
600
50%
500
400
35%
33%
30%
25%
300
211
200
158
156
87
100
30%
129
103
82
Bahrain
Non-life Insurance Premium
(US$ million)
32.2%
40%
35%
32.0%
35.2%
3,252
30%
24.8%
2,912
3,000
2,500
2008/2007 (%)
4,079
4,000
3,500
2008
25%
25.4%
2,203
20%
2,000
15%
1,500
1,000
520
500
703
10%
470
356
258
322
5%
0%
0
The UAE
Saudi
Arabia
Kuwait
Oman
Bahrain
10%
0%
The UAE
Non-life Insurance Premium growth
2008 / 2007, (%)
2007
20%
Oman
109
0
4,500
40%
Life Insurance Premium growth
2008 / 2007, (%)
The UAE
Kuwait
Saudi
Arabia
Source: Swiss Re, June 2009
1.2.4. ‘National’ insurers
Some UAE insurance companies have been granted the
status of ‘national’ insurer. National insurers have privileged
access to risks with ‘national’ status - generally high-riskvalue projects of state-owned companies. The Emirate of
Source: Swiss Re, June 2009
Abu Dhabi dominates this market, since it hosts most of the
Property and miscellaneous accident insurance accounts for
the majority of the non-life insurance business, while motor
insurance accounts for about 30%, according to the Arab
Insurance Market Review. (See chart 10).
large scale energy related projects. The remainder of the
insurance market is open to competition, whereby insurance
companies with or without ‘national’ insurer status compete
on equal terms. The Dubai insurance market is considered
Chart 10: The UAE non-Life insurance, 2007
more open and competitive, with not ‘national’ insurer status.
100% = US$3,252.1 million
Property &
Misc.
Accident
55.9%
Marine &
Aviation
13.8%
Motor
30.3%
Source: Arab Insurance Market Review, 2008
P a g e | 8

9.
2. Financial performance
Chart 13: 3-year stock market return* (%)
10%
2.1. Financial performance
1 year
2 year
3 year
1%
0%
-3%
-10%
Defining the peer group
-11%
-20%
-30%
In this chapter we are assessing the financial performance of
ten of the largest publicly listed conventional insurers in the
UAE by total revenue for 2008. This group is referred to as
‘the UAE insurers’ throughout the report.
-16%
-20%
-22%
-23%
-25.1%
-29%
-40%
-50%
-60%
-59%
-67% -60% -65%
-70%
-66%
-68%
-72%
-80%
ADII Index
Insurance penetration in the UAE increased from 1.5% in
DFIINSU
Index
-37%
-42% -38%
-38%
-41%
ADBF Index
DFIBANK
Index
ADRE Index
DFREALTY
Iindex
ADEG Index
Source: Bloomberg, *as at July 31, 2009
2005 to 2.0% in 2008 but remains well below the global
average of 7.1% (See chart 12). The UAE insurance market
is highly fragmented with 57 insurance companies present,
Gross premiums written by the UAE insurers grew by an
well above the norm for a country of its size. This suggests
average CAGR of 30.5% in 2006 to 2008 (See chart 14). All
there is a need for consolidation within the industry.
players posted positive double digit growth rates. Oman
Insurance
Chart 12: Insurance penetration in the UAE
1,200
2.1
1.5
1.7
742.4
400
National
Insurance
Company and Arab Orient Insurance Company are the
market leaders. However, the growth rate fell significantly in
2.0%
the first half of 2009, to 15.1% in the first quarter and 0.8% in
1.5%
the second (Only seven of the ten companies had reported
first half results at the time of this report). Given the rapid
495.6
339.5
0.5%
74.7
89.8
164.7
208.1
2005
0
Dhabi
1.0%
2.0
905.9
600
200
Abu
2.5%
1,000
800
Company,
2006
2007
decline in the second quarter, we expect the growth rate to
be weaker in the second half of the year.
2008
0.0%
Non-Lif e Insurance density: premium per capita (US$)
Chart 14: Gross premiums written, 2006 to 1H2009
Lif e Insurance density: premium per capita (US$)
(In US$ mn)
Insurance penetration: premium in % of GDP
800
Source: Swiss Re, June 2009
2006
2007
2008
1H2009
140%
CAGR
700
120%
600
100%
500
80%
400
Index (ADEG Index), the DFM Financial Banks Index
(DFIBANK Index) and the Dubai Financial Realty Index
(DFREALTY Index) which recorded negative returns of 38%,
Dubai Insurance
Al Khazna
Al Wathba
Al Sagr
Emirates Insurance
11.1% and 25.1% respectively compared to the ADX Energy
0%
Al Ain Ahlia
Insurance Index (DFIINSU Index) yielded negative returns of
20%
Al Buhaira
ADX Insurance Index (ADII Index) and the DFM Financial
40%
100
Arab Orient
banking and realty industries. Over the past three years, the
200
Abu Dhabi National
affected by the global financial turmoil than the energy,
60%
300
Oman Insurance
The UAE insurance industry has been somewhat less
Source: Company website, Zawya, CAGR for Al Ain Ahlia, Al
Sagr and Dubai Insurance is for 2006 to 2008 as 1H2009
results are not yet available
60% and 66% respectively (See chart 13).
The UAE insurance industry is highly dependent on the
reinsurance sector, ceding over half of gross premiums to
international and increasingly local reinsurance companies.
Premium retention is gradually improving however with the
P a g e | 9

10.
local insurers growing in size and sophistication. In 2008,
58.9% of net premiums were ceded to reinsurers, compared
to 62.0% in 2006 (See chart 15).
Chart 17: Net Underwriting Profit vs. Net Premium
Growth, 2006 to 2008 (%)
Chart 15: Premiums ceded to reinsurers, 2008
Net underwriting profit, CAGR, 2006 - 2008, (%)
67.2%
66.8%
72.3%
62.7%
53.1%
50.2%
Net premium earned, CAGR, 2006 - 2008, (%)
160.0%
Average = 58.9% 60.1%
120.0%
47.5%
47.9% 47.7%
80.0%
40.0%
0.0%
Source: Company website, Zawya
Al Buhaira
Emirates Insurance
Al Sagr
Dubai Insurance
Oman Insurance
Al Wathba
Arab Orient
Abu Dhabi National
Al Ain Ahlia
Al Wathba
AL Ain Ahlia
Dubai Insurance
Oman Insurance
Arab Orient
Al Khazna Insurance
Al Buhaira National
Insurance
Emirates Insurance
Al Sagr National
Insurance
Abu Dhabi National
Insurance
-40.0%
Source: Company websites, Zawya
1
The trend of increasing premium retention by the UAE
Over the last three years, the average combined ratio of the
insurers continued in the first half of 2009. Notably, average
peer group increased from 64.6% in 2006 to 75.4% in 2008,
premiums ceded fell to about 57.7% in the first half of 2009
primarily due to higher claims ratios. This is a reflection of
and 56.4% in the second quarter alone (See chart 16).
the rapid growth rate experienced during this period,
increased competition and cross-subsidization of less
Chart 16: Premiums ceded to reinsurers
70%
68%
1H07
71%
65%
61%
57%
66% 64%
66%
profitable lines, such as 3rd party motor insurance. That said,
1H08
69%
64%
60%
55% 55%
51%
50%
50% 50%
1H09
60%
60%
58%
the average combined ratio remains very strong by
international standards. Nine out of the ten companies have
combined ratios below the critical 100% mark. Arab Orient
Insurance Company is by far the most efficient overall with a
combined ratio below 50%. Oman Insurance Company and
Dubai Insurance Company also stand out with relatively
Arab Orient Al Buhaira Abu Dhabi Emirates Oman Ins Al Khazna
National Insurance
Insurance
Average
Source: Company website, Zawya
healthy loss ratios. The good underwriting performance
continued in 2009, with an average combined ratio of 73.4%
for the seven companies that had reported by the time this
report was produced (See chart 18).
Profitability
While all players have reported strong top line growth, the
same is not true for underwriting profits. About half of the
players have improved their underwriting profits over the
past three years, whereas half have recorded declines (See
chart 17). In 2008, the average growth in underwriting profits
for the peer group was 7.0%, compared to 18.8% in 2007.
1
Combined ratio = Expense ratio (Net underwriting expense/Net
premium earned) + Loss ratio (Net claims incurred/Net premium
earned)
P a g e | 10

11. Chart 19: Investment return (including fair value
changes taken to equity), 2006 to 1H 2009 (%)
Chart 18: Combined ratio, 2008 (%)
Expense Ratio
120%
100%
80%
60%
40%
20%
0%
-20%
-40%
Loss Ratio
Combined Ratio
40%
Avg. combined ratio = 75.4%
20%
0%
-20%
Al Khazna
Al Buhaira
Emirates Insurance
Al Sagr
Dubai insurance
Oman Insurance
Al Wathba
Arab Orient
Abu Dhabi National
Al Ain Ahlia
-40%
-60%
2006
2007
2008
1H09
Al Ain Ahlia
Abu Dhabi National
Arab Orient
Al Wathba
Oman Insurance
Dubai insurance
Al Sagr
Emirates Insurance
Al Buhaira
Al Khazna
Source: Company website, Zawya
Combined ratio – 2008 and first half 2009
106.9%
102.1%
93.2%
2008
1H09
The shape of the return graph, clearly illustrates how players
90.3%
73.4%
75.0%
69.8%
71.0%
65.9%
58.1%
45.7%
with low investment risk (e.g. Arab Orient Insurance
77.9% 75.8%
73.4%
66.3%
Company) have a smoother return profile than the sharp V-
48.6%
shape for those with more aggressive investment profiles.
The UAE insurers reported an average ROE of 17.4% in the
Average
combined ratio
Oman Insurance
Emirates
Insurance
Arab Orient
Al Wathba
Al Khazna
Al Buhaira
Abu Dhabi
National
Shareholder return
first half of 2009, compared to -10.3% in 2008, 33.0% in
2007 and -13.5% in 2006. The performance has been very
volatile due to the high exposure to local equity and real
Source: Company website, Zawya
estate markets. Arab Orient Insurance Company has
outperformed its peers by reporting consistent ROE of over
Contrary to insurers in developed markets, the UAE peer
20% in the last three years, thanks to its more conservative
group has a very high exposure to regional equity and real
investment strategy, demonstrating the strength of the local
estate markets. This has resulted in high volatility in
insurance industry absent of investment returns (See chart
investment returns. Some players have tried to mitigate this
20).
by
reclassifying
some
investments
from
‘trading’
to
Chart 20: ROE, 2006 to 1H 2009 (%)
80%
60%
40%
20%
0%
-20%
return will have a large impact on earnings.
Average
Al Khazna
exposure to regional equity markets and the investment
1H09
Al Buhaira
investing in the UAE insurers, you get a very significant
2008
Emirates Insurance
5.5% (See chart 19). It is important to understand that by
2007
Al Sagr
and -19.0% in 2008. The return in the first half of 2009 was
Oman Insurance
assets, the average investment return was -18.5% in 2006
Al Wathba
When including fair value changes in ‘available-for-sale’
Arab Orient
statement.
2006
Abu Dhabi National
taken straight to equity rather than through the income
Dubai insurance
100%
Al Ain Ahlia
‘available-for-sale’, in order that changes in fair value can be
Source: Zawya, Company filings
P a g e | 11

12.
Capital Adequacy and Leverage
Asset Quality
Gross underwriting leverage (net premiums written to
The UAE insurers in general pursue very aggressive
shareholder funds) increased to 34.9% in 2008 from 23.6%
investment strategies, with high exposures to risky assets
in 2006, indicating that the regional insurance players have
like regional equities and real estate. Concentration risk is
been assuming gradually higher levels of risk in their
also high. The asset-mix has changed somewhat over the
business (See chart 21). It is of course also important to
past two years with cash and cash equivalent now
consider what type of risk is being underwritten (long or short
accounting for a larger proportion of the overall asset base
tail for example) and what type of controls are in place to
while the proportion of high-risk investments has declined
manage underwriting risk.
(See chart 23). Falling equity markets and a decline in the
value of property investments explains the decline in
Chart 21: Net Premium Written / Equity (%)
2007
proportion of risky assets. Moreover, an increase in liquidity
2008
levels also reflects efforts by insurance companies to reduce
67%
a 45% increase in cash levels in 2008, while Dubai
Insurance Company reported an increase of 64%.
Chart 23: High Risk Assets / Invested Assets (%)
Al Khazna
Al Sagr
Al Buhaira
Oman Insurance
8%
3%
13% 16%
12%
120%
2006
2007
Oman Insurance
27%
21%
10%
8%
18%
Al Wathba
asset risk. For example, Oman insurance Company reported
41% Avg. 2008
= 35.0%
28%
Emirates Insurance
16%
15%
Arab Orient
Abu Dhabi National
Al Ain Ahlia
28%
26%
22%21% 17%
16%
40% 40%
33%
Dubai insurance
44% 46%
43%
52%
49%
38%
Al Wathba
2006
2008
100%
80%
Avg. 2008 = 65.2%
60%
Source: Company website, Zawya
40%
20%
Company, followed by Abu Dhabi National Insurance
Al Khazna
Al Buhaira
Al Sagr
Emirates Insurance
chart 22). The best capitalized was Dubai Insurance
Dubai insurance
years with an average of 46.6% at the end of 2008 (See
Arab Orient
assets ratio. This ratio has also declined over the past three
Abu Dhabi National
0%
Al Ain Ahlia
A more static measure of leverage is the equity to total
Source: Company website, Zawya
Company and Al Khazna National Insurance Company.
Chart 22: Total Equity / Total Assets (%)
2006
2007
The UAE insurers rely to a great extent on reinsurance to
mitigate concentration risk and to avoid underwriting risks
2008
100%
beyond their capacity and capabilities. As a consequence,
80%
UAE insurers are exposed to credit risk of reinsurance
Avg. 2008
= 46.6%
60%
counterparts. Reinsurance recoverable as a percentage of
40%
equity of our UAE peer group rose from an average of 24.1%
20%
in 2006 to 33.2% in 2008. For some insurers, including Al
Al Khazna
Al Buhaira
Emirates Insurance
Al Sagr
Dubai insurance
Oman Insurance
Al Wathba
Arab Orient
Abu Dhabi National
Al Ain Ahlia
0%
Buhaira National Insurance Company and Arab Orient
Insurance Company, the exposure is in excess of 50% of
equity.
Source: Company website, Zawya
P a g e | 12

13. Reserve Adequacy
their conventional counterparts, the Islamic insurance
Average reserve levels of the UAE insurers declined over
the past two years to 77.7% of net premiums earned in 2008
from 86.9% in 2006 (See chart 24). The reserve level is
generally a function of the nature of the risks underwritten
companies reported negative returns on capital in 2008 due
to
poor
investment
returns
and
negative
fair
value
adjustments.
2.3. Comparative Financial Performance
(short or long tail in particular) and the speed at which claims
Chart 25 summarizes the performance of the UAE insurance
are settled.
companies compared to the average of the peer-group on
Chart 24: Total Reserves to Net Premium Earned,
2008 (%)
parameters such as asset quality, capital adequacy,
profitability and reserve adequacy.
120%
100%
106%
Average = 77.7%
80%
76%
82%
72%
67%
75%
Al Khazna
60%
81%
Al Buhaira
87%
80%
52%
40%
20%
Emirates Insurance
Al Sagr
Dubai insurance
Oman Insurance
Al Wathba
Arab Orient
Abu Dhabi National
Al Ain Ahlia
0%
Source: Company website, Zawya
2.2. Takaful and life insurance attractive growth areas
Historically the UAE insurers focused primarily on general
insurance, although today most of them have also moved
into life insurance. Notably, for Oman Insurance Company
and Emirates Insurance Company, life insurance accounted
for 23.7% and 17.0% respectively of gross premium revenue
in 2008. We consider exposure to life insurance a strength,
given the segments excellent growth potential (See chapter
4).
Some of the major players, including Al Buhaira National
Insurance Company and Arab Orient Insurance Company
offer both conventional insurance and Takaful. We consider
this a competitive strength, given the excellent growth
potential of both segments. In 2008 UAE Islamic insurers
2
grew at a somewhat faster pace than conventional
insurance. A challenge faced by the Takaful industry is the
relative shortage of suitable investment opportunities. Like
2
Abu Dhabi National Takaful Company, Dubai Islamic Insurance and
Reinsurance Company, Islamic Arab Insurance Company (Salama)
P a g e | 13

14.
Chart 25: Comparative financial performance of the UAE insurers in 2008
Average
Better than peers
Worse than peers
Source: Alpen Capital
P a g e | 14

15. practices, product innovation and effective and varied
3. Valuations
distribution. Emirates Insurance Company is also displaying
The valuation part of this report should be read in the context
similar characteristics, but is trading at lower multiples.
of limited free floats and extremely low stock liquidity of UAE
insurers (See section 4). The P/E and P/B ratios are
Chart 27: The UAE conventional insurers, P/BV (TTM)
calculated based on share prices sourced from Bloomberg
5.0
4.0
and includes stocks that have not traded for weeks or in
4.0
some instances for months.
3.0
2.7
2.6
1.8
2.0
0.0
to an international peer group of 14.0x (See chart 26).
Average Developed and
Emerging Markets
Average (The UAE)
1.2
Dubai Insurance
Al Sagr
Al Buhaira
Al Wathba
Emirates Insurance
Abu Dhabi National Insurance Co.) is 13.7 times (x), similar
Abu Dhabi National
Insurance
of the UAE peer group (excluding Al Wathba Insurance and
0.5
1.1
Al Ain Ahlia
superior growth of the UAE insurance market. The P/E ratio
0.9
Al Khaznah
1.0
valuations compared to international peers considering the
1.7
0.9
0.9
Oman Insurance
The UAE insurers are trading at relatively moderate
Source: Bloomberg, Zawya
Chart 26: The UAE conventional insurers, P/E (TTM)
25.0
22.0
20.4
20.9
4. Stock Liquidity
20.0
13.0
15.0
10.0
14.2
13.7
Although the UAE insurers appear to have significant free
6.4
9.1
5.0
4.4
floats, extremely low turnover velocity suggest the stocks are
very closely held. All the ten stocks covered in this survey
Average Developed and
Emerging Markets
Average (The UAE)
Dubai Insurance
Al Khaznah
Al Sagr
Al Buhaira
Emirates Insurance
Al Ain Ahlia
Oman Insurance
0.0
are very thinly traded, as demonstrated by an average
turnover velocity3 of 0.36% (See chart 28). This suggests
only 0.36% of the shares change hands during a year.
Chart 28: Turnover Velocity, (%)
Source: Bloomberg, Zawya
1.52%
1.02%
The valuations of the UAE insurers are underpinned by
value
shortcomings
in
by
terms
addressing
of
relatively
investment
simple
strategy
The UAE
Average
Al Sagr
Emirates
Insurance
Al Khaznah
significant
0.36%
0.24%
0.15% 0.18%
Al Wathba
valuations. There appears to be potential to unlock
Al Ain Ahlia
Oman
Insurance
transparency and weak stock liquidity weigh on the stock
Abu Dhabi
National
Insurance
we feel the aggressive investment strategy, lack of
Dubai
Insurance
0.02% 0.03% 0.06% 0.07%
Al Buhaira
strong growth and good underwriting performance. However,
Source: Bloomberg, Traded volume measured from Aug 1,
2008 to July 31, 2009 and market capitalization as at July 31,
2009
and
transparency.
The UAE insurers are trading at an average price-to-book
ratio (P/BV) of 1.7x. (See chart 27).
Oman Insurance Company and Al Buhaira National
Insurance Company are trading at higher multiples than their
peers. This is a reflection of strong, but not excessive,
growth rates, good underwriting performance and strong
market positions. This is accomplished by good underwriting
3
Turnover Velocity (%) = Annual traded volume/Market capitalization
P a g e | 15

16. points in 2006 to 2008, reaching 1.6% in 2008 from 1.25%
5. Growth Illustration
The growth potential of the GCC insurance industry is very
good, particularly in view of relatively low insurance
penetration rates. Below we illustrate the impact on growth in
aggregate
insurance
premiums
based
on
a
central
macroeconomic scenario.
in 2005. In our model we assume the non-life insurance
penetration reaches 2.3% by 2012 (See chart 29).
Chart 29: Non-life insurance penetration, (%)
6%
2005
2006
2007
2008
5%
5.1. Assumptions
4%
For the purpose of the illustration, we have considered the
3%
life and non-life segments separately. The central scenario is
2%
based on the following assumptions:
1%
• We assume non-life premiums are driven by growth in
0%
The UAE Kuwait
Oman
nominal GDP and by changes in non-life penetration (i.e.
non-life premiums as a percentage of GDP). We have
Saudi The US Europe Emerging World
Arabia
Markets
Source: Swiss Re
assumed the non-life penetration level to grow at a 0.1%point in 2009 and by 0.2%-points per annum in 2010 to
5.3. Life Density
2012. We have used IMF’s April 2009 forecast for nominal
The life insurance density in the UAE increased at a CAGR
GDP growth.
of 40.7% in 2005 to 2008 compared to 7.3% globally.
The link to GDP is by no means exact, and may fluctuate
from year to year, since the UAE GDP is to a large degree
driven by oil prices. In addition, historically oil revenues were
to a large extent invested abroad. This has changed in the
last few years, with more investments aimed a developing
However, life insurance density in the UAE of US$208.1 in
2008 is approximately half of the global average of
US$369.7 and only one-sixth of the European average of
US$1,244.1. In our model we have assumed the life
insurance density reaches US$467 by 2012 (See chart 30).
the local economies.
• We assume that life premiums are driven by population
Chart 30: Life insurance density, (US$)
2,000
growth and by changes in life density (i.e. per capita
premiums). We have assumed life density increases by
1,600
15% in 2009 and 25% per annum in 2010 to 2012. We
1,200
have used IMF’s April 2009 forecast for population growth.
Some of the key reasons for an increase in the UAE
insurance penetration rates towards global averages include
the introduction of regulation for health and home insurance,
800
400
0
The UAE Kuwait
growth in organized savings, greater availability of Takaful
insurance
products,
greater
affluence
and
changing
Oman
2005
Saudi
Arabia
2006
The US
2007
Europe Emerging World
Markets
2008
Source: Swiss Re
consumer habits.
5.2. Non-life insurance penetration
There are good reasons why the UAE life density should not
reach the levels of Europe or the US. The UAE has a high
The non-life insurance penetration in the UAE was about
1.6% in 2008 - approximately half of the global average of
2.95%. The penetration rate increased by about 0.35%-
income disparity, with life insurance more prevalent in high
income groups. Tax incentives, both in terms of income and
heritance tax, boosts the demand for certain long term
P a g e | 16

17.
savings schemes and annuities in the developed world. Such
tax incentives are not applicable to the UAE. The population
is also characterized by a relatively young local population
with a good social safety net, not inclined to buy pension and
long term saving products, and an expatriate population that
is more inclined to remit savings to their home countries.
On the basis of the above assumptions, the UAE insurance
market will grow at a CAGR of 15.3% in 2008 to 2012. With
the life segment growing more than twice as fast as the nonlife segment (See chart 31). The growth in gross premium
income reported so far by the UAE insurers for the first half
of 2009 has been stronger than our forecast for the full year
of 2009, however there is a distinct slowdown in growth from
14.9% in the first quarter of 2009 to only 0.8% in the second
quarter.
Chart 31: The UAE insurance market, 2008 to 2012
(US$ million)
10,000
8,683
8,000
2,506
6,000
5,016
3,973
4,000
2,000
937
721
1,701
307
1,394
2,476
380
3,252
6,369
4,079
2,096
0
2005
2006
2007
Total Life premiums, US$ million
2008
2012
Total Non-life premiums, US$ millon
Source: Alpen Capital
P a g e | 17

18. relations department to handle investor queries. Only Oman
6. Corporate Governance
Corporate governance standards and transparency are
critical aspects to potential investors. This is an area were
UAE insurers have potential to improve (See chart 32).
Insurance Company and Emirates Insurance Company have
a contact list of their management departments displayed on
the website. Limited information is available on the
composition of investment portfolios.
Some of the key shortcomings in our sample of UAE insurers
include the following: limited financial information is available
on the respective websites and investors have to look to the
respective stock exchanges for audited financial statements.
Normally only three years of historical financial information is
available. None of the insurers have a dedicated investor
However, as per stock exchange regulations, all player
report quarterly results, most of which contain appropriate
disclosure of related notes to financial statements. The
majority of the insurers are rated by an international rating
agency, most commonly Standard & Poor’s or AM Best.
Chart 32: Corporate governance and transparency
Corporate Communication & Disclosure
Latest
Availability
History of
annual
of Investor
publicly
report
relations
available
availabile on
contact
accounts
website
details
Company Name
Level of
interim
results
disclosure
Frequency of
Rated by rating
reporting on
agency
the website
Abu Dhabi National Insurance
Al Ain Ahlia Insurance Company
Al Buhaira National Insurance
Al Khazna Insurance Company
Al Sagr National Insurance Company
Al Wathba National Insurance
Arab Orient Insurance Company
Dubai Insurance Company
Emirates Insurance Company
Oman Insurance Company
The UAE Average
Unfavorable
Least Attractive
More Attractive
Attractive
Most Attractive
Source: Bloomberg, Zawya, Alpen Capital
P a g e | 18

19.
7. Key Growth Drivers
Chart 34: Life Expectancy at birth, (years)
7.1. Favorable demographics
78.1
77.4
76.7
The UAE population is expected to grow at a CAGR of 3.0%
in 2009 to 2012 to reach 5.4 million, according to IMF. It
76.6
75.8
74.7
grew at a CAGR of 5.1% in 2003 to 2008. An increasing role
68.9
67.6
in this is being played by expatriates. Expatriates are
66.4
expected to constitute 82% of the UAE population in 2009
according to MEED (See chart 33).
2000-2005
The UAE
Chart 33: UAE population: Residents and Expatriates
100% =
in '000
4,229
4,488
4,765
5,066
80%
81%
81%
82%
2005-2010
2010-2015
The GCC
World
Source: World Population Prospects: The 2008 Revision by
the United Nations
7.2. High and rising GDP per capita
With a GDP per capita of US$54,607 in 2008, second only to
Qatar, the UAE is one of the richest economies of the GCC.
20%
19%
19%
18%
2006
2007
2008E*
2009E*
Notably, buoyed by oil revenues, GDP per capita in the UAE
more than doubled in the past five years. According to the
Residents
Expats
Source: MEED, *E=Estimated
IMF, UAE GDP per capita is expected to increase at a
CAGR of 6.2% in 2010 to 2013 after growing at 16.9% in
2003 to 2008, and a sharp correction of -19.7% in 2009 (See
chart 35). Greater affluence will drive demand for all types of
insurance products.
The UAE demography is characterized by a relatively young
29.7 years, 99.1% of the UAE population is aged below 65
years, compared to an average of 93.3% for India and China
and 85.5% for the US and the UK (CIA Factbook, April 2009
estimates). Also, the UAE labor force is expected to grow at
a fast pace, as the age bracket of 15 to 64 years is expected
to account for 79.9% of the overall population in 2010 and
80.1% in 2015, higher than the world average of 65.5% and
65.8% respectively. A young working population in the UAE
augurs well for the non-life insurance industry.
60,000
50,000
40,000
30,000
20,000
10,000
0
-10,000
-20,000
6.3%
5.6%
6.5%
6.4%
10.0%
5.0%
0.0%
-5.0%
-10.0%
y-o-y growth (%)
higher than the average median age of India and China of
Chart 35: GDP per capita in the UAE, (US$)
GDP per capita (US$)
population. In spite of the UAE’s median age of 30.1 years,
-15.0%
-19.7%
2009
2010
-20.0%
2011
GDP per capita (US$)
2012
2013
GDP per capita y-o-y growth (%)
Source: IMF World Economic Outlook, April, 2009
7.3. Economic diversification
Moreover, life expectancy at birth in the UAE is rising
The demand for non-life insurance has increased at a rapid
steadily. According to the United Nations, life expectancy at
pace, as the GCC economies continue to diversify away
birth is expected to reach 78.1 years by 2010-2015 (See
from oil dependence. With more and more projects coming
chart 34). This is considered positive for both non-life and life
to fruition, this should spur demand for property and casualty
insurance industries.
insurance products. Notably, the property and casualty
insurance business in the GCC grew at a CAGR of 26.8% in
2003 to 2007, lead by the UAE that grew by 34.7%.
P a g e | 19

20. The growth in the region seems unabated. Despite many
Compulsory
heath
insurance
has
been
gradually
project cancellations in the last six months, there are
implemented across the GCC. Compulsory health insurance
approximately US$2.1 trillion of projects either planned or
for expatriates has been in force since 2006 in Saudi Arabia.
currently underway in the GCC over the next five to seven
Mandatory heath insurance for expatriates and their
years (See chart 36). This reflects a year-on-year growth of
dependents was introduced in Abu Dhabi in two steps in July
8.9% at June 2009. Notably, the UAE commands a lion
2006 and January 2007. Dubai was expected to follow suit in
share of the total GCC projects (approximately 44%).
January 2009, but this has now been delayed until 2010. The
Dubai health insurance regime is expected to cover all
Chart 36: The GCC Projects, (US$ billion)
residents, local as well as expatriates.
894
938
The Strata Law in Dubai (not yet released) requires property
owners to have home insurance cover. However, in practice,
575
only mortgage property owners have home insurance cover
475
265 270
39
90 95
60
as it is legally binding. Notably, as per Hadef & Partners, a
206 206
legal firm based in Dubai, most of self-financed properties
are uninsured. However, with the regulations under the
Bahrain
Kuwait
Oman
Qatar
22 June 2008 (US$ billion)
Saudi The UAE
Arabia
22 june 2009 (US$ billion)
Strata Law to be released soon, all owners' associations will
have to take building and public liability insurance. The
Strata law is also expected to apply to property owners who
Source: MEED, Gulf projects (June 22, 2009)
have
rented
out
their
properties.
The
effective
implementation of the Strata Law is likely to boost not only to
7.4. Regulation driving growth
A key driver of insurance penetration in emerging markets is
the introduction of compulsory insurance cover, including
home insurance but also home contents, fire and public
liability insurance.
third party motor, health and home insurance.
Motor insurance is a low margin business in the UAE and
many other GCC countries due to caps being imposed on
the price of third party motor cover. Nevertheless, motor
premiums in the GCC grew at a CAGR of 21.2% in 2003 to
2007. The growth was led by the UAE and Saudi Arabia,
where premium income grew at 28.0% and 20.4%,
respectively (See chart 38).
Chart 37: Motor insurance premiums in the UAE and
Saudi Arabia, (US$ million)
986.6
754.5
651.6
597.9
512.7
444.3
368.1
309.7
2003
448.7
367.3
2004
2005
The UAE
2006
2007
Saudi Arabia
Source: Arab Insurance Market Review, 2008
P a g e | 20

21. 8. Emerging Trends
Chart 39: The GCC Islamic insurance market outlook,
(US$ million)
8.1. Islamic Insurance making inroads
CAGR 19.7%
Though not very prominent in the UAE, the religiously
3,792
CAGR 5.5%
2,673
acceptable takaful insurance (Islamic non-life insurance) and
family takaful (Islamic life insurance) is picking up pace in
5,019
CAGR 13.1%
2,046
the region. Takaful in the UAE grew at a CAGR of 52.1% in
2004 to 2007, albeit from a low base, compared to 38.9% for
the GCC as a whole. Consequently, takaful penetration
2007E
Conservative Balanced
(insurance premiums / GDP) in the UAE increased from
0.10% in 2005 to 0.15% in 2007, whereas takaful
Optimistic
2012 Projections
Source: World Takaful Report, 2009, E=Estimated
penetration in the GCC reached 0.28% in 2007 from 0.21%
in 2005 (See chart 38). With gross takaful contributions of
US$1,695 million in 2007, Saudi Arabia is the world’s largest
8.2. Regulatory framework
Islamic insurance market.
The UAE insurance regulation is currently minimal, although
some initiatives are underway to improve the regulatory
Taka ful Penetration rate in 2007, ( %)
Chart 38: Islamic Insurance, penetration and growth
1.0%
0.9%
2007 establishing a new regulatory body, the Insurance
Saudi Arabia
(38.0%, 0.85%)
0.8%
Commission, for the industry. In addition, Solvency II, the
0.7%
updated set of regulatory requirements for insurance firms
0.6%
0.5%
0.4%
operating in the EU, is expected to be implemented by 2012.
Bahrain
(57.9%, 0.32%)
The GCC
(38.9%, 0.28%)
The Solvency II rules limit the amount of risk that insurance
0.3%
0.2%
Kuwait
(31.9, 0.03%)
0.1%
0.0%
0.0%
framework. A new insurance law came into force in August
10.0%
20.0%
Qatar
(44.9%, 0.07%)
30.0%
40.0%
companies can underwrite in relation to their capital bases
The UAE
(52.1%, 0.15%)
50.0%
60.0%
(See chart 40).
70.0%
Gross Takaful Contributions, 2004-2007 CAGR ,(%)
Source: World Takaful Report, 2009, Size of bubbles
indicates gross takaful contributions (US$ million) in 2007
Given its low penetration level in the GCC, we expect
Islamic insurance to witness substantial growth over the
medium to long term. The World Takaful Report 2009
projects the GCC takaful market to grow at a CAGR of about
13.1% in 2009 to 2012 reaching US$3.8 billion (See chart
Chart 40: Pillars of Solvency II regulations
Pillar 1
• Quantitative
requirements
(Amount of
capital an
insurer must
hold)
Pillar 2
• Governance and
risk
management of
insurers (Own
Risk and
Solvency
Assessment)
• Effective
supervision of
insurers
(Supervisory
Review Process)
Pillar 3
• Reporting,
disclosure and
transparency
requirements
Source: Central Bank of Bahrain, May 2009
39).
In fact, the Emirates Insurance Association (EIA) has
advised its members to align their capital risk balance in line
with the new solvency rules. The new rules will also force
insurers to make significant changes to their financial
reporting systems including fair-valuation of their balance
sheets and greater public disclosure of financial statements,
risk measures and capital calculations. The new capital
requirements should induce greater discipline in areas of
P a g e | 21

22. investment strategy, underwriting, reinsurance and risk
Many of the UAE insurance companies are rated by
management and may result in consolidation amongst the
Standard & Poor’s and/or AM Best. The rating agencies
many UAE insurance companies currently owned and
provide a substitute to regulation by subjecting the
operated by families and business groups.
companies to capital adequacy tests and comprehensive
reviews of business and financial profiles, strategy and
Foreign ownership of local UAE-based insurers is currently
governance. The rating agencies also help to address some
capped at 25%.
of the shortcomings in terms of transparency by publishing
regular
updates
on
their
rating
assessments.
Chart 41: Regulations in GCC Insurance
Bahrain
Kuwait
Oman
Qatar
Saudi Arabia
The UAE
Regulator
Bahrain Central
Bank
Ministry of
Commerce and
Industry
Oman Capital
Markets Authority
Qatar Financial
Center Authority
(QFCRA)
Saudi Arabian
Monetary Agency
Insurance
Companies
Division at UAE
Ministry of
Economy.
Dubai Financial
Services
Authority for
entities
registered at the
DIFC
Association
Bahrain
Insurance
Association
Kuwait Insurance
Companies
Union
Oman Insurance
Association
(under formation)
N.A.
N.A.
Emirates
Insurance
Association
Regulatory Law
or Reference
Work
Insurance
Rulebook, April
2005
Insurance Law,
1961
Insurance
Companies Law,
March 1979
Emiri Decree No.
1/1966, QFCRA
regulations
Cooperative
Insurance
Companies
Control Law,
2003
Federal Law
No. 9 of 1984
concerning
insurance
companies
Federal Law
No. 6 of 2007
regarding the
incorporation of
the insurance
authority and
work regulation
Capital
requirements
Tier 1 capital:
BHD 5 million
(US$10 million)
Tier 2 Capital:
Max. 100% of tier
1 capital,
Overseas and
Captives not
subject to
minimum capital
Local insurers:
KD50,000
(US$525,000)
Foreign Insurers:
KD225,000
(US$35 million)
OMR5 million
(US$13 million)
US$10 million
Insurance
services (only):
SR100 million
(US$27 million),
Insurance and
Reinsurance
services: SR200
million (US$54
million)
AED50 million
(US$14 million)
Source: The GCC Insurance regulators
P a g e | 22

23. •
8.3. Leveraging distribution channels
to expand outside its traditional Abu Dhabi base in a bid
Being a relatively young insurance market, distribution in the
to capture more of the growing insurance market in the
UAE is achieved through traditional channels of local offices
country.
and tie-ups such as agencies, brokers and banks. According
to EIA, there are approximately 230 brokers in the UAE but
October 2008: Emirates Insurance Company is planning
•
May 2008: Abu Dhabi based Al Khazna Insurance
only 20% have adequate professional and education
Company acquired a 15% stake in Saudi Arabia’s Sanad
qualifications. Moreover, approximately 70% of the brokers
for Co-operative Insurance and Reinsurance to offer new
are marginal and rely only on motor insurance business.
insurance covers in the Saudi market.
Although conventional distribution channels, such as brokers
and
agents,
enable
insurers
to
control
•
expenses,
May 2008: Arab Orient Insurance Company, Abu Dhabi
Islamic Bank (Egypt) and Amlak Finance signed a MoU
diversification into bancassurance, online and telemarketing
to launch a joint venture insurance firm in Egypt. The
offers attractive growth potential. The most promising is
management of the joint entity, the Arab Orient Takaful
bancassurance, which offers a win-win situation for both
Insurance Company, is overseen by Arab Orient
parties wherein a bank receives fee-based income and an
Insurance Company.
insurance company gets access to a larger pool of
customers. According to the Middle East Bancassurance
•
December 2007: Tokio Marine Group, a leading takaful
Conference, May 2007, bancassurance sales in the Middle
insurance services provider in the UAE and Saudi Arabia,
East could reach US$100 million by 2010.
is planning to expand across the MENA region through
its new company Tokio Marine Middle East Limited.
Recent distribution channel related initiatives include:
•
•
AXA Insurance Gulf launched an online service in June
March 2007: AXA Insurance Gulf acquired 10% in United
Insurance Company, Bahrain.
2009 enabling purchase and renewal of motor policies
online.
•
8.5. Advent of foreign players leading to increased
competition
National General Insurance (NGI) has partnered with
An attractive market coupled with low minimum capital
Aviva Life Insurance and Emirates National Bank of
requirements has attracted an increased number of foreign
Dubai to increase life assurance sales. NGI has also
players to the UAE thereby increasing competition. The UAE
started offering insurance products online.
Ministry of Economy granted licenses to four new insurance
firms in February 2009 (See chart 42).
8.4. Cross - border expansion
To capture growth opportunities outside the home markets,
several
insurance
players
in
the
GCC
have
either
Chart 42: The
nationality
•
insurance
companies
by
100% = 57
established or acquired operations abroad, especially in the
MENA region. Some of the most recent announcements:
UAE
Foreign*
46%
July 2009: T’azur, the Bahrain based Islamic insurer, is
planning to expand its operations in the UAE, Saudi
Arabia and Qatar as it expects Islamic insurance
products to form 50% of the Gulf insurance industry in
The UAE
54%
the near term.
Source: EIA, *Includes other GCC countries
•
May 2009: Gulf Insurance Company of Kuwait, acquired
36% of Jordan based Arab Orient Insurance for US$19.6
million.
P a g e | 23

24.
According to Oman Insurance Company, foreign insurance
8.7. Expected consolidation
companies constitute around 30% of the total volumes of
There are 57 insurance companies operating in the UAE, a
insurance premiums in the UAE.
significantly higher representation than in both mature and
Gradually weaker average underwriting margin over the past
three years suggests that the market is turning more
developing nations. Foreign ownership restrictions have
historically hampered effective consolidation in the industry.
competitive. The foreign players that have entered the
We expect the implementation of Solvency II by 2012 to
market over the past couple of years have brought with them
increase consolidation efforts in order to strengthen balance
product
and
sheets and to diversify investment, reinsurance and
marketing capabilities etc. With greater competition naturally
insurance risk exposures. A greater part of risks currently
comes downward pressure on the premiums.
reinsured could be retained in the future.
innovation,
greater
efficiency,
technical
8.6. Focus on core activities
After having suffered significant erosion in share capital in
2006 and again in 2008 due to equity market volatility, we
expect that local insurers will begin to run their businesses
more like insurance companies and less like investment
holding companies. For someone that wants exposure to the
UAE insurance industry there is not much choice, with all
players heavily invested in local equity and property markets.
The player with the most conservative investment strategy,
Arab Orient Insurance, is also the one with the best return on
capital.
The share of liquid assets of the UAE conventional insurers
has increased as they adopt more risk-averse profiles. The
share of cash and cash equivalents as a percentage of total
investments increased from 24.8% in 2006 to 34.8% in 2008,
while the share of investment securities and properties
decreased from 75.2% in 2006 to 65.2% in 2008. The shift
has to a large extent been involuntary as equity and property
prices have declined (See chart 43).
Chart 43: Investment profile of the UAE insurers
100% =
(in US$
millions)
2,679.4
3,529.3
3,073.2
17.9%
17.3%
23.5%
24.8%
31.9%
57.2%
2006
50.7%
2007
34.8%
41.7%
2008
Investment Securities Liquid Investments Investment properties
Source: Company website, Zawya, Data represent an
average of the ten largest players
P a g e | 24

25. 9. Key Risks
Chart 44: Projects cancelled or on hold, (US$ billion)
9.1. Equity and property market volatility
389.8
The UAE insurers are pursuing very aggressive investment
strategies, with high exposure to local stock and real estate
markets. This may be acceptable in the context of strong
capitalizations, but makes for very volatile and unpredictable
earnings and return on capital. The performance of the UAE
6.0
Bahrain Qatar
insurers has been more driven by investment returns than by
underwriting performance over the past three years. In
37.2
11.1
9.9
53.2
Oman Kuwait Saudi
Arabia
The
UAE
Source: MEED, Gulf projects (June 22, 2009)
addition, there is very little disclosure into the investment
strategies and investment composition.
We see an opportunity here for the insurance sector to adopt
more traditional and conservative investment strategies,
thereby offering potential investors an opportunity to invest in
the local insurance market without exposure to the local
equity and real estate markets. This will reduce earnings
volatility, raise the risk adjusted return and ultimately stock
prices.
9.4. Increased use of captive insurance
Captive insurance, or “self insurance”, is most prevalent in
Bahrain, Dubai and Qatar as these countries have
regulations for establishing captives (See chart 45). Large
corporations commit part of their own capital to cover their
risks. Captive insurance is particularly useful when insurance
for certain risks are either unavailable or only available at
unacceptable terms. The move to captive is encouraged by
the lower expense ratios for captive compared to commercial
9.2. Weakening underwriting performance
insurers. According to Marsh’s Global Captive Benchmark
Report 2008, 65% of captives have an expense ratio of less
The underwriting performance of the UAE insurers has
weakened gradually over the past three years. This is a
than 5% compared to an average of 25% for commercial
insurers.
function of growing competition, rapid growth and to some
extent relaxation of underwriting standards. That said,
Chart 45: Captive Insurance Regulations
underwriting performance still remains good compared to
developed markets, with an average combined ratio of 77%
Issue
for our sample in 2008.
Dubai
Internatio
nal
Financial
Centre
Central
Bank of
Bahrain
Qatar
Financial
Center
The global downturn has led to an increased number of
Minimum
capital
required
Class I CaptiveUS$150,000
Class 2 CaptiveUS$250,000
Class 3 CaptiveUS$1 million
Captive (SPV)
- US$200,000
Class I
CaptiveUS$150,000
Class 2
Captive- US$1
million
Class 3
CaptiveUS$250,000
Solvency
margin
requirements
Minimum base
capital or the
risk based
capital,
whichever is
higher
Category C1
firm US$200,000
Category C2
firm US$800,000
Minimum base
capital or the
risk based
capital,
whichever is
higher
Application
fees
US$15,000
US$265
US$10,000
Tax regime
9.3. Project delays and cancellations
50 year taxholiday
No corporate
taxes (except
for oil
companies)
Tax-exempt
projects being put on hold or cancelled, thereby reducing the
potential insurable property in the GCC. According to MEED,
projects in the GCC worth about US$0.5 trillion are either on
hold or have been cancelled. Around 77% of the projects in
question are located in the UAE (See chart 44). An
increasing number of projects being put on hold or cancelled
could hamper the growth of the non-life insurance business
in the UAE.
Source: Middle East Insurance Review, 2008
P a g e | 25

26.
According to AON Consulting, there are seven captives in
the Middle East, with many more in the making. The most
notable among these is Saudi Armaco (Stellar Insurance),
the UAE-based Tabreed (Tabreed Cooperative Insurance)
and Qatar Petroleum (Al Koot Insurance and Reinsurance).
As large firms set up their own captives, a sizeable portion of
the country’s premium income goes beyond the reach of the
commercial insurers.
9.5. Shortage of skilled labor
With an increasing number of insurance firms being
established in the GCC, the industry is witnessing a shortage
of professionals, such as underwriters. Underwriting skills
are a key requirement in growing insurance operations. The
Arab Forum of Insurance Regulatory Commission (AFIRC)Hawakamah survey also notes that the recruitment of
qualified board members and management remains a
challenge in MENA insurance markets.
P a g e | 26

27.
Appendix: Company Profiles
P a g e | 27

28.
Abu Dhabi National Insurance Company (ADNIC DH Equity)
STOCK DATA
PERFORMANCE SUMMARY*
(US$ million)
2007
Gross premium written
2008
2007-‘08
(% change)
315.2
369.4
17.2
Net premium earned
90.0
115.1
27.8
Underwriting profit
29.1
28.7
(1.3)
Underwriting profit margin
(%)
32.3
25.0
-
Net profit
90.0
57.2
(36.3)
ROE (%)
16.4
10.5
-
ROA (%)
10.2
6.3
-
AED
ADNIC DH
ADNIC.ADSM
5.5
9.75/5.5
2,062.5
561.5
1,181.4
321.6
Bloomberg Ticker:
Exchange Ticker:
Price (July 23, 2009)
52 Week High/Low
Mkt. Cap (AED million)
(US$ million)
Enterprise value (AED million)
(US$ million)
120%
S&P Financial Strength Credit Rating: A-/Stable
110%
100%
90%
*Zawya
80%
COMPANY DESCRIPTION
70%
60%
Established in 1972, Abu Dhabi National Insurance Company (ADNIC) is the
largest of the Abu Dhabi based ‘national’ insurers. It offers all classes of life
and non-life insurance and reinsurance products and services. It categorizes
its insurance products into personal insurance, business insurance and
overseas insurance. The personal insurance segment covers home, car, life
& health and accident insurance, while business insurance covers fire &
property, aviation, marine hull, engineering, energy and cargo insurance.
ADNIC offers aviation, energy, cargo, marine, property and engineering
insurance to its overseas clients through its overseas insurance segment.
Aug-08
Oct-08
Jan-09
ADNIC UH Equity
•
•
Net premium for the first half of 2009 increased 29.7% year on year
to US$93.0 million. However, ADNIC reported a net loss of US$41.0
million in the first half of 2009 compared to net income of US$74.3
million in same period in 2009
Jul-09
ADII Index
SHAREHOLDER STRUCTURE
Abu Dhabi
Investment
Council
23.80%
Recent Events:
•
Apr-09
Ahmad Bin
Khalaf Al
Outaibah
10.11%
Sheikh
Tahnoun
Bin
Mohammed
Abu Dhabi Al Nahyan
5.30%
Cooperative
Public
55.74%
In February 2009, ADNIC launched ‘Shifa’, a medical insurance
product, in partnership with Vanbreda International, a global health
insurance consultant and administrator. Shifa offers customers an
extensive network of more than 10,000 medical service providers
worldwide
Society
5.05%
KEY INSURANCE RATIOS (%)
In January 2009, ADNIC launched a new brand campaign
introducing a “revitalized look and feel” for its corporate identity
2006
2007
2008
Claims ratio
65.1
68.6
75.5
Combined ratio
60.1
67.7
75.0
8.9
8.2
4.8
Investment return*
*Excluding change in fair value

29.
Al Ain Ahlia Insurance Company (ALAIN UH Equity)
STOCK DATA
PERFORMANCE SUMMARY*
(US$ million)
2007
Gross premium written
2008
2007-‘08
(% change)
172.9
189.6
9.7
Net premium earned
61.4
74.2
20.8
Underwriting profit
12.0
5.0
(58.2)
Underwriting profit margin
(%)
19.5
6.7
-
Net profit
56.7
39.2
(30.9)
ROE (%)
20.5
13.3
-
ROA (%)
12.4
7.0
-
AED
ALAIN UH
ALAIN.ADSM
64.0
97.5/64.0
960.0
261.4
541.3
147.4
Bloomberg Ticker:
Exchange Ticker:
Price (June 23, 2009)
52 Week High/Low
Mkt. Cap (AED million)
(US$ million)
Enterprise value (AED million)
(US$ million)
120%
S&P Financial Strength Credit Rating: BBBpi
110%
100%
90%
*Zawya
80%
COMPANY DESCRIPTION
70%
Established in 1975, Al Ain Ahlia Insurance Company (AAAIC) is the second
largest of the Abu Dhabi-based ‘national’ insurance companies. It offers all
classes of insurance and re-insurance services. AAAIC’s offering includes
motor, engineering, property, marine, energy, aviation, life and health
insurance.
60%
Aug-08
Oct-08
Jan-09
ALAIN UH Equity
Apr-09
Jul-09
ADII Index
SHAREHOLDER STRUCTURE
Recent Events:
•
•
In February 2009, AAAIC approved the distribution of a cash
dividend of AED 10 per share for the year 2008
•
In February 2008, Saudi Arabian insurer Tawuniya, AAAIC and
Bahrain Kuwait Insurance Company launched Manasik, an insurance
plan for the pilgrims of Haj and Umrah in Saudi Arabia
Abu Dhabi
Investment
Council
19.70% Mohamme
d Bin Juan
Rached Al
Badie Al
Thaheri
10.28%
Khaled
Mohamme
d Bin Juan
Rashed Al
Badie Al
Thaheri
5.45%
Net premium income and net profit for the first quarter of 2009 were
US$18.3 million and US$10.4 million, representing an increase of
10.3% and 19.7% respectively year on year
Public
64.57%
KEY INSURANCE RATIOS (%)
2006
2007
2008
Claims ratio
70.2
76.7
94.6
Combined ratio
75.2
80.5
93.3
Investment return*
13.0
11.6
7.9
*Excluding change in fair value

30.
Al Buhaira National Insurance Company (ABNIC UH Equity)
STOCK DATA
PERFORMANCE SUMMARY*
(US$ million)
2007
Gross premium written
2008
2007-‘08
(% change)
142.5
198.6
39.4
Net premium earned
48.9
65.8
34.6
Underwriting profit
20.9
27.5
31.6
Underwriting profit margin
(%)
42.8
41.9
-
Net profit
43.8
13.7
(68.8)
ROE (%)
23.9
7.3
-
ROA (%)
11.6
2.8
-
S&P Financial Strength Credit Rating: BBB/Negative
AED
ABNIC UH
ABNIC.ADSM
10.3
10.3/8.4
2,575.0
701.1
-
Bloomberg Ticker:
Exchange Ticker:
Price (February 22, 2009)
52 Week High/Low
Mkt. Cap (AED million)*
(US$ million) *
Enterprise value (AED million)
(US$ million)
* Source: Zawya, July 13, 2009
130%
120%
110%
*Zawya
100%
COMPANY DESCRIPTION
90%
80%
Established in 1978, Al Buhaira National Insurance Company (ABNIC) is the
fifth largest insurer in the UAE and a ‘national’ insurer of Sharjah. It
underwrites all types of insurance risks, except savings and accumulation of
funds. ABNIC provides property, engineering, energy, marine & aviation,
medical, motor and travel insurance.
70%
60%
Aug-08
Oct-08
Jan-09
ABNIC UH Equity
Apr-09
Jul-09
ADII Index
SHAREHOLDER STRUCTURE
Recent Events:
•
Net premium for the first half of 2009 of US$48.0 million increased by
31.0% year on year. ABNIC reported a net income of US$17.2 million
in the first half of 2009 compared to US$21.8 million in the same
period in 2008, a decrease of 21.0% year on year
•
In March 2008, ABNIC, in partnership with Uniqua Group, a group
which owns 30 insurers in 20 European countries, established
Takaful Al Emarat insurance. Takaful Al Emarat provides health and
life insurance through the largest network based on Islamic Shariah
in the Gulf region, the Middle East and other Islamic countries
HH Sheikh
Tarek Bin
Faisal
Khaled Al
Qasimi
9.59%
Public
38.07%
Al Qasimi
Group
11.22%
HH Sheikh
Abdullah
Bin
Mohammed
Bin Ali Al
Thani
13.47%
The Private
Investment
Group
27.65%
KEY INSURANCE RATIOS (%)
2006
2007
2008
Claims ratio
88.5
93.9
88.5
Combined ratio
49.6
57.2
58.1
7.3
8.6
-4.3
Investment return*
*Excluding change in fair value

31.
Al Khazna National Insurance Company (AKIC UH Equity)
STOCK DATA
PERFORMANCE SUMMARY*
(US$ million)
2007
2008
2007-‘08
(% change)
Gross premium written
43.5
59.3
36.3
Net premium earned
21.1
26.5
25.5
Underwriting profit
(1.7)
(1.8)
Underwriting profit margin
(%)
(7.9)
(6.9)
-
Net profit
37.8
9.2
(75.8)
ROE (%)
22.2
4.9
-
ROA (%)
13.0
2.7
-
AED
AKIC UH
AKIC.ADSM
0.93
2.61/0.73
372.0
101.3
493.6
134.4
Bloomberg Ticker:
Exchange Ticker:
Price (July 6, 2009)
52 Week High/Low
Mkt. Cap (AED million)
(US$ million)
Enterprise value (AED million)
(US$ million)
120%
S&P Financial Strength Credit Rating: Not Rated
*Zawya
100%
80%
60%
40%
COMPANY DESCRIPTION
20%
Incorporated in 1996, Al Khazna Insurance Company (AKIC) is a ‘national’
insurer based in Abu Dhabi. It is authorized to write all classes of life and
non-life insurance business. Its offerings include marine cargo & hull, energy
& aviation, property, engineering, general accidents, motor and medical & life
insurance.
0%
Aug-08
Oct-08
Jan-09
AKIC UH Equity
Apr-09
Jul-09
ADII Index
SHAREHOLDER STRUCTURE
Recent Events:
•
•
Net premium for the first quarter of 2009 of US$5.8 million decreased
by 11.2% year on year. Also, AKIC reported a net loss of US$3.1
million in the first quarter of 2009 compared to net income of US$2.8
million in the same period in 2008
Ocha
Hamad Eid
5.01%
Public
89.99%
In May 2008, AKIC acquired a 15% stake in Saudi Arabian Sanad for
Co-operative Insurance and Reinsurance
Hazaa
Mohammed
Abdulaziz
Rabih
Chahine Al
Mohairi
5.00%
KEY INSURANCE RATIOS (%)
2006
Claims ratio
Combined ratio
Investment return*
2007
2008
85.9
77.4
72.9
103.6
94.9
91.8
15.1
18.1
7.4
*Excluding change in fair value

32.
Al Sagr National Insurance Company (ASNIC UH Equity)
STOCK DATA
PERFORMANCE SUMMARY*
(US$ million)
2007
Gross premium written
2008
2007-‘08
(% change)
118.1
117.2
(0.8)
Net premium earned
55.7
57.8
3.7
Underwriting profit
16.4
15.3
(6.8)
Underwriting profit margin
(%)
29.5
26.5
-
Net profit
31.0
18.3
(41.0)
ROE (%)
28.7
13.1
-
ROA (%)
11.8
5.6
-
S&P Financial Strength Credit Rating: BBBpi
AED
ASNIC UH
ASNIC.DFM
4.56
4.56/2.61
1,048.8
285.5
-
Bloomberg Ticker:
Exchange Ticker:
Price (April 21, 2009)
52 Week High/Low
Mkt. Cap (AED million)*
(US$ million) *
Enterprise value (AED million)
(US$ million)
* Source: Zawya, July 13, 2009
200%
160%
*Zawya
120%
COMPANY DESCRIPTION
80%
Established in 1979, Al Sagr National Insurance Company (ASNIC) offers all
classes of life and non-life insurance, reinsurance products and services. Its
main insurance offerings are fire and general accident, marine, motor, life
and medical insurance. ASNIC operates in Saudi Arabia through its
subsidiary, Al Sagr Company for Co-operative Insurance and has plans to
establish a subsidiary in Qatar.
40%
Jan-09
In March 2009, ASNIC issued 30 million bonus shares worth AED30
million (US$8.16 million) taking the total number of shares to 230
million
•
Abdullah
Omran
Taryam
9.47%
In 2008 it bought 55% of an insurer based in Jordan and took over
the management of Union Insurance Co PSC based in Ajman, UAE
Gulf General
Investment
Company
53.00%
In 2008, Al Sagr took a 26% share in a new Saudi insurer, Al Sagr
Company for Co-Operative Insurance, and closed down its former
Saudi operations previously conducted through a subsidiary in
Bahrain
•
Apr-09
ASNIC UH Equity
Net premium for the first quarter of 2009 of US$18.8 million
increased by 28.7% year on year. ASNIC reported a net income of
US$9.1 million in the first quarter of 2009 compared to US$12.2
million in the same period in 2008, a decrease of 25.5% year on year
•
Mar-09
May-09
Jun-09
Jul-09
BMEXSA Index
SHAREHOLDER STRUCTURE
Recent Events:
•
Feb-09
Near East Enmaa Al
Investment Emirate for
Company General
8.75%
Trading Ayman
7.50% Mohammed
Yusri Al
Dweik
5.00%
Amjad
Mohammed
Yusri Al
Dweik
5.00%
Public
7.03%
Khaled
Khalfan
Abdullah
Mohammed Omran
Al Roumi
Taryam
2.00%
2.25%
KEY INSURANCE RATIOS (%)
2006
2007
2008
Claims ratio
66.5
84.1
82.0
Combined ratio
58.3
70.5
73.5
Investment return*
-8.9
14.9
3.0
*Excluding change in fair value

33.
Al Wathba National Insurance Company (AWNIC UH Equity)
STOCK DATA
PERFORMANCE SUMMARY*
(US$ million)
2007
2008
2007-‘08
(% change)
Gross premium written
47.0
75.7
60.9
Net premium earned
20.2
34.9
73.1
Underwriting profit
2.2
2.4
6.7
Underwriting profit margin
(%)
11.1
6.8
-
Net profit
18.5
8.7
(53.2)
ROE (%)
14.6
6.6
-
ROA (%)
8.5
3.5
-
S&P Financial Strength Credit Rating: Not Rated
*Zawya
AED
AWNIC UH
AWNIC.ADSM
7.69
10.4/6.3
922.8
251.2
-
Bloomberg Ticker:
Exchange Ticker:
Price (March 10, 2009)
52 Week High/Low
Mkt. Cap (AED million)*
(US$ million) *
Enterprise value (AED million)
(US$ million)
* Source: Zawya, July 13, 2009
160%
140%
120%
COMPANY DESCRIPTION
100%
80%
Established in 1997, Al Wathba National Insurance Company (AWNIC) offers
general insurance and re-insurance services. Its offerings include fire &
general accident, engineering, motor, marine, oil & energy, health and
personal insurance.
•
•
Aug-08
Oct-08
Jan-09
AWNIC UH Equity
Apr-09
Jul-09
ADII Index
SHAREHOLDER STRUCTURE
Recent Events:
•
60%
Net premium for the first half of 2009 of US$26.8 million increased by
50.1% year on year. However, AWNIC reported a net income of
US$2.7 million in the first half of 2009 compared to US$10.6 million
in the same period in 2008, a decrease of 74.8% year on year
In January 2009, AWNIC acquired technology to enhance its internal
communication network through Unified Communications, a Nortel
and Microsoft’s product. Unified Communications converges voice
and data services with telephony, fax, email, video and instant
messaging to strengthen communication between employees and its
outside contacts
In April 2008, AWNIC, in association with Vision Investment
Company, launched Vision Insurance in Oman. With a capital base
of RO 5 million, Vision Insurance provides all lines of non-life, group
life and group medical insurance
Public
27.80%
Saif Darweesh
Ahmad Al
Ketbi
19.15%
Abu Dhabi
National
Company for
Building
Materials
3.40%
HH Sheikh
Saif Bin
Mohammed
Bin Butti Al
Hamed
13.20%
Ahmad Bin Ali
Khalfan Al
Dhaheri
5.25%
Mohammed
Ahmad Al
Kassemi
5.60%
Abu Dhabi
Cooperative
Society
9.27%
Rashed
Darweesh
Ahmad Al
Ketbi
9.27%
Ali Rashed
Nasser Al
Omeira
7.06%
KEY INSURANCE RATIOS (%)
2006
2007
2008
Claims ratio
64.8
70.2
77.3
Combined ratio
80.4
88.9
93.2
5.2
8.5
3.1
Investment return*
*Excluding change in fair value

34.
Arab Orient Insurance Company (AOIC UH Equity)
PERFORMANCE SUMMARY*
STOCK DATA
(US$ million)
2007
Gross premium written
2008
2007-‘08
(% change)
208.7
272.3
30.5
Net premium earned
52.9
67.9
28.5
Underwriting profit
24.7
36.9
49.5
Underwriting profit margin
(%)
34.5
49.5
-
Net profit
37.1
40.9
10.3
Net profit margin (%)
43.2
10.3
-
ROE (%)
31.1
27.5
-
ROA (%)
11.0
9.7
AED
AOIC UH
AOIC.DFM
-
Bloomberg Ticker:
Exchange Ticker:
Price (na)
52 Week High/Low
Mkt. Cap (AED million)
(US$ million)
Enterprise value (AED million)
(US$ million)
-
S&P Financial Strength Credit Rating : A/Stable
* Zawya
COMPANY DESCRIPTION
Established in 1980, Arab Orient Insurance Company operates into two main
insurance segments, namely personal insurance and commercial insurance.
The personal insurance segment offers motor, comprehensive household,
personal accident, medical, individual life and travel insurance. Its
commercial insurance segment offers property, engineering, liability, money,
fidelity guarantee, contingency, marine, workmen's compensation, group life,
group medical, motor fleet, and bond insurances.
SHAREHOLDER STRUCTURE
Al Futtaim
Private
Company
5.00%
Recent Events
•
Gross premium and net profit for the first half of 2009 were
US$150.0 million and US$28.8 million, an increase of 10.0% and
30.0% respectively year on year
•
Al Futtaim
Group 5.00%
Arab Orient Insurance Company, Abu Dhabi Islamic Bank and
Union National Bank recently established a Takaful insurance
company in Egypt
•
Al Futtaim
Development
Services
Company
90.00%
In April 2007, the company commenced operations in Syria
KEY INSURANCE RATIOS (%)
2006
2007
2008
Claims ratio
49.0
50.5
44.8
Combined ratio
54.4
53.3
45.7
6.7
7.1
0.2
Investment return*
*Excluding change in fair value

35.
Dubai Insurance Company (DIN UH Equity)
STOCK DATA
PERFORMANCE SUMMARY*
(US$ million)
2007
Gross premium written
2008
2007-‘08
(% change)
16.7
33.0
98.0
Net premium earned
6.0
15.3
161.6
Underwriting profit
2.0
4.4
115.7
Underwriting profit margin
(%)
34.1
28.1
-
Net profit
12.0
18.3
52.4
ROE (%)
11.9
17.7
-
ROA (%)
10.3
14.3
-
S&P Financial Strength Credit Rating: Not Rated
AED
DIN UH
DIN.DFM
28.9
289.0
78.7
-
Bloomberg Ticker:
Exchange Ticker:
Price (June 10, 2009)
52 Week High/Low
Mkt. Cap (AED million)*
(US$ million) *
Enterprise value (AED million)
(US$ million)
* Source: Zawya, July 13, 2009
120%
110%
100%
*Zawya
90%
COMPANY DESCRIPTION
80%
Dubai Insurance Company (DIC) offers all classes of general life and non-life
insurance products. DIC mainly offers short term insurance contracts for fire
and engineering, motor, marine, general accident, medical and group life
risks.
•
•
•
60%
Aug-08
Oct-08
Jan-09
DIN UH Equity
Apr-09
Jul-09
DFIINSU Index
SHAREHOLDER STRUCTURE
Recent Events:
•
70%
In July 2009, DIC and the UK based insurance specialist William
Russell Limited introduced global life insurance plans for GCC
residents, offering cover of up to 20 times the salary up to a
maximum of US$1.5 million
Abdulwah
eed
Hassan
Mohamme
d Al
Rostamani
16.77%
Public
43.61%
Net premium and net profit for the first quarter of 2009 were US$8.1
million and US$3.7 million, an increase of 43.5% and 26.9%
respectively year on year
In March 2009, DIC distributed AED 3 per share cash dividend for
the year ended December 31, 2008
Others
20.27%
In March 2008, DIC distributed bonus shares of 33.3% of the paid up
capital
Mashreq
4.16%
Mohamme
d Obeid Al
Mulla and
Sons
Abdullah 8.00%
Hamad
Majed Al
Futtaim
7.19%
KEY INSURANCE RATIOS (%)
2006
2007
2008
Claims ratio
34.4
49.1
45.3
Combined ratio
21.9
65.9
71.9
-10.3
7.9
17.8
Investment return*
*Excluding change in fair value

36.
Emirates Insurance Company (EIC UH Equity)
STOCK DATA
PERFORMANCE SUMMARY*
(US$ million)
2007
Gross premium written
2008
2007-‘08
(% change)
133.2
180.5
35.5
Net premium earned
31.7
51.8
63.7
Underwriting profit
12.6
13.8
9.5
Underwriting profit margin
(%)
39.7
26.6
-
Net profit
37.0
30.9
(16.5)
ROE (%)
10.8
10.2
-
ROA (%)
7.5
6.1
-
AED
EIC UH
EIC.ADSM
6.49
8.83/6.0
778.8
212.1
712.0
193.9
Bloomberg Ticker:
Exchange Ticker:
Price (June 25, 2009)
52 Week High/Low
Mkt. Cap (AED million)
(US$ million)
Enterprise value (AED million)
(US$ million)
120%
110%
100%
S&P Financial Strength Credit Rating: BBB+/Stable
*Zawya
90%
COMPANY DESCRIPTION
80%
70%
Incorporated in 1983, Emirates Insurance Company (EIC) is the third largest
of the Abu Dhabi based ‘national’ insurers and the sixth largest in the UAE.
EIC offers a comprehensive range of insurance products to both corporate
and individual customers. EIC offers the following classes of insurance
services: aviation, bankers’ blanket bond insurance, cargo, fidelity guarantee,
fire, marine, money, motor and life insurance.
60%
Aug-08
Oct-08
Jan-09
EIC UH Equity
•
SHAREHOLDER STRUCTURE
Abu Dhabi
Cooperative
Society
15.35%
Net premium for the first half of 2009 of US$31.9 million increased by
33.4% year on year. EIC reported a net income of US$11.5 million in
the first half of 2009 compared to US$25.9 million in the same period
in 2008, a decrease of 55.5% year on year
In July 2008, EIC was the first Abu Dhabi insurance company to be
awarded a fully interactive insurance company financial strength
rating of BBB+ from Standard & Poor’s
Jul-09
ADII Index
Recent Events:
•
Apr-09
Al Mazroui
Group
13.95%
Public*
58.89%
Abu Dhabi
Investment
Council
11.81%
* Al Qasimi Group shareholding is part
of the public stake
Gross Premium Income
(in US$ million)
48.5
47.1
KEY INSURANCE RATIOS (%)
43.6
30.0
32.7
33.8
15.0
Marine
2007
2008
Claims ratio
80.5
63.6
67.8
72.3
60.3
73.4
5.1
6.3
7.8
26.7
14.2
Life and
Medical
2006
Combined ratio
22.3
Engineering
2007
Fire and
General
Accident
Motor
Investment return*
*Excluding change in fair value
2008

37.
Oman Insurance Company (OIC UH Equity)
STOCK DATA
PERFORMANCE SUMMARY*
(US$ million)
2007
2008
2007-‘08
(% change)
Gross premium written
412.2
581.4
41.0
Net premium earned
192.3
271.3
41.0
Underwriting profit
47.9
59.9
25.2
Underwriting profit margin
(%)
24.9
22.1
-
Net profit
171.8
68.1
(60.3)
ROE (%)
33.3
12.4
-
ROA (%)
15.8
5.2
AED
OIC UH
OIC.DFM
11.0
11.0/10.0
4,198.8
1,143.2
4,378.4
1,192.1
Bloomberg Ticker:
Exchange Ticker:
Price (June 30, 2009)
52 Week High/Low
Mkt. Cap (AED million)
(US$ million)
Enterprise value (AED million)
(US$ million)
-
120%
110%
S&P Financial Strength Credit Rating: BBB+/Stable
100%
*Zawya
90%
COMPANY DESCRIPTION
80%
Established in 1975, Oman Insurance Company (OIC) is the largest insurer in
the UAE, with its base in Dubai. It mainly issues short term insurance
contracts for property, marine and motor risks and medical, group life and
personal accident risks. OIC also invests its funds in investment securities
and properties through its wholly-owned subsidiary, Equator Trading
Enterprises LLC.
60%
70%
Aug-08
Oct-08
Jan-09
OIC UH Equity
Apr-09
Jul-09
DFIINSU Index
SHAREHOLDER STRUCTURE
Recent Events:
•
Net premium for the first half of 2009 of US$175.1 million increased
by 26.6% year on year. OIC reported a net income of US$38.8
million in the first half of 2009 compared to US$97.6 million in the
same period in 2008, a decrease of 60.3% year on year
•
Mashreq
63.65%
Saeed
Mohammed
Saeed Al
Ghandi
4.50%
Ahmad
Humaid Al
Tayer
1.00%
In Q1 2009, OIC commenced operations in Qatar
•
Al Dhaheri
Group
5.00%
In March 2009, OIC distributed AED 0.5 per share cash dividend for
the year ended December 31, 2008
Public
25.85%
KEY INSURANCE RATIOS (%)
2006
2007
2008
Claims ratio
50.4
52.5
54.4
Combined ratio
70.4
75.1
77.9
5.1
14.9
3.1
Investment return*
*Excluding change in fair value

38.
For more information:
Name:
Tommy Trask
Designation:
Executive Director
Contact détails:
t.trask@alpencapital.com
Tel:
+971 (0) 4 363 4322
Name:
Sanjay Vig
Designation:
Managing Director
Contact détails:
s.vig@alpencapital.com
Tel:
+971 (0) 4 363 4307

39.
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